What is Rootstock (RSK)? Bitcoin Sidechain to Enable Smart Contracts

Rootstock (RSK) is a two-way pegged sidechain to Bitcoin designed to enable full Turing-complete smart contract functionality for the Bitcoin ecosystem. The RSK network is secured via merge-mining with a Federation checkpointing mechanism, effectively allowing it to retain the security of Bitcoin’s double-spend proofs and settlement finality.

RSK is an open-source project that was initially proposed in 2014 and subsequently accompanied by its whitepaper by Sergio Demian Lerner in 2015. RSK is being released in stages, following its initial mainnet launch of Bamboo in early January 2018.

How Does It Work?

RSK is a sidechain pegged to Bitcoin through a two-way peg. Eventually, the peg will convert into an automatic peg once “the community accepts the security tradeoffs of the automatic peg.” At a high level, RSK is its own virtual machine (RVM) platform designed to add smart contract functionality to Bitcoin while also enabling increased scalability and instant transactions using some innovative approaches.

The RSK two-way pegged sidechain is the primary component that allows decentralized applications (dapps) to be built on top of Bitcoin. RSK’s sidechain is a symmetric two-way peg to Bitcoin using a hybrid Federation and merge-mining model. With sidechains, the two-way peg consists of a mechanism by which the coins on the primary chain are locked up, and corresponding tokens on the sidechain are released for use. Notably, RSK does not mint its own tokens nor did it have a pre-mine, therefore, it does not compete in speculative value with Bitcoin.

RSK employs its own pegged coin called SmartBitcoin (SBTC) that is tethered to Bitcoin. The Bitcoin blockchain (primary chain in this context) cannot verify transactions on a separate blockchain, so when a transfer occurs, BTC is locked on the primary chain, and the corresponding amount of SBTC is unlocked on the RSK chain. In transfers from RSK (sidechain) to Bitcoin (primary chain), the SBTC is locked on the sidechain, and the BTC is unlocked on the primary chain.

RSK uses a hybrid Federated sidechain model due to the need for a degree of trust in the two-way peg process. This is because Bitcoin does not natively support validation of external SPV proofs, creating the need for a temporary storing mechanism for locking and unlocking BTC on the primary chain for cross-chain transfers. The Federation model in RSK consists of semi-trusted third parties (STTPs) who are the members responsible for securing the locked funds. While this requires a degree of trust in the process, it is a highly automated process, and the Federation’s role is to audit the behavior of the software governing the process.

The Federation secures funds in the peg through a threshold signature that requires a simple majority to transfer Bitcoin out of the peg wallet. The Federation is comprised of well-known and respected Bitcoin community members (25 blockchain companies with high-security standards) that are identified with their public key in the checkpoint signature scheme outlined below. The Federation can also add and remove members via an on-chain voting mechanism.

The Federation plays a vital role in the merge-mining component of RSK that allows it to retain the same blockchain immutability as Bitcoin. RSK employs the DECOR block reward sharing system in combination with the GHOST rule to maximize Bitcoin mining efficiency by reducing network latencies for mid-state block switches and always securing the best chain. Federated checkpoints provide verification of PoW mined blocks by a majority of the Federation. This is designed to mitigate a scenario where the RSK hash power is below 50% of Bitcoin’s total hash power, and the remaining hash power could be used to outperform the existing RSK hash power to create a double-spend.

In essence, RSK is actually a drivechain/sidechain hybrid model. A drivechain is a two-way peg with no proof of control that gives custody of the locked bitcoins to merge-miners rather than the Federation, effectively allowing miners to vote on when to unlock the locked bitcoins and where to send them. This is a simpler model that does not come with many of the complexities of implementing sidechains and also reduces the need for trust in the process.

However, the mechanism of the drivechain voting custody of locked BTC only occurs in the current RSK model when:

“…the RSK hashing power is over 66% of the maximum BTC hashing difficulty observed in the best chain and the fees paid in a block are higher or equal to the average reward of a Bitcoin block.”

Eventually, the RSK model will transition to the drivechain model where merge-miners will overtake the role of the Federation, pending a soft-fork BIP proposal:

“With the drivechain BIP, the merge-miners obtain veto power, and can prevent a transaction created by the Federation from spending collateral without the automatic authorization provided by the RSK blockchain.”

Incidentally, significant developments with drivechains were recently in the news cycle following the release of the first drivechain release from developer Paul Sztorc for Bitcoin. Once merge-mining engagement reaches a target threshold, and Bitcoin can verify authentic SPV proofs from other chains, then drivechain-powered merge-mining will overtake the role of the notaries (Federation). This relationship can also dynamically adjust based on the level of merge-mining engagement.

The final RSK two-way peg model will subsequently be a hybrid Drivechain + Federation/Sidechain model. RSK provides a comprehensive analysis of the various forms of sidechains, drivechains, and hybrid models here.

Adding Functionality to Bitcoin

RSK focuses on adding smart contract functionality to the Bitcoin ecosystem along with improving transaction speeds and increasing scalability. The RSK Virtual Machine (RVM) is the core of the smart contract platform that even allows for EVM-compatible smart contracts to seamlessly run on RVM.

RSK can also sustain 100 TPS for simple payment transactions with a block confirmation time of ~10 seconds due to its integration of DECOR + GHOST. RSK will implement the Lumino Transaction Compression Protocol (LTCP) — part of the Lumino Network — as RSK’s off-chain payment network. The goal is to eventually reach a TPS of more than 2,000 on-chain by allowing for a higher volume of on-chain transactions using the same space consumed on the blockchain.

However, the LTCP is a trade-off choice left to individual users, since transaction compression leads to data reuse and reduced privacy. RSK also increases scalability by using fraud proofs and probabilistic verification of transactions.

Tools, Uses, and The Future

Rootstock offers an extensive amount of resources for its project and relevant technological concepts and tools. They also have a comprehensive bounty program for identifying vulnerabilities.

Rootstock’s resources available on their website include multiple technical papers, such as the original whitepaper, sidechain/drivechain paper, LTCP paper, and RSK Bounty documentation. Further, they have RSK Educate; courses tailored explicitly towards business professionals and developers. The RSK blog also provides key updates on the project and offers some independent analysis of ongoing trends and technical developments in the industry.

There are also network statistics and a block explorer available through their website.

Recently, it was floated that the RSK team is working on integrating an AWS-like infrastructure layer to be built on top of Rootstock for enabling AWS services to be utilized by the development community. The network would be called RIFOS and have a native RIF token. Such an infrastructure layer built on top of Rootstock would allow for applications to be deployed on top of Bitcoin using the LTCP for consuming ready-made services such as Oracles, payments, and data storage. As a result, all of the AWS-like services and applications would run on the RSK Smart Protocol with the security of the Bitcoin blockchain.

Conclusion

RSK is an ambitious project with many moving parts. Building a smart contract platform on top of Bitcoin through a sidechain/drivechain mechanism has some significant advantages, mainly that smart contracts can be run on the most secure blockchain network. How RSK fits into the evolving landscape and improves the functionality of Bitcoin is another trend worth watching as projects continue to emerge that optimize the legacy cryptocurrency.

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